Wondering how to buy that dream home? Sonal Sachdev offers some advice…

Rarely would you find a house being rented out at lower than its earlier rental value. Few, if any, would have encountered a home owner who is willing to renew a rent/license agreement for less than the previous rent amount. This is largely because people who wish to live in developed residential areas on rent far exceed the number of houses available in these locations.

Now, if you wish to buy a house and want to be located near where you presently live (on rent), do you wait till you can afford it?

That’s one approach, which more often than not, comes with high risk. For one, rentals may continue to edge up and crimp your investible surplus, even as prices of homes in the area rise. Of course, you can get lucky if property prices crash, but that’s betting big against the long-term trend in a growth economy.

The alternative is to either invest in a smaller house in the area, to ride on local property trends, and lease it out, or to invest in a house in a more affordable part of the city. In the latter case, you could either opt for a house that can be leased out or one that is under construction, so that you can limit your monthly outflows for some years till it is ready for possession.

To illustrate, let us say the house you intend to buy today is priced at Rs. 2,50,00,000 and the one you can afford is available for Rs.100,00,000. If you wait for 5 years, chances are that your coveted house may double in value, making it still beyond reach. However, if you manage to grow your investment in an affordable home at the same pace by reducing outflows through rent accruals/delayed EMI (applicable for under construction projects) and riding on capital gains, chances are that you will find the dream house well within your reach. So, start early even if you start small.